Is the Minimum Wage Ethically Justifiable? An Order-Ethical Answer

In Christoph Luetge & Nikil Mukerji (eds.), Order Ethics: An Ethical Framework for the Social Market Economy. Springer. pp. 279-292 (2016)

Nikil S. Mukerji
Ludwig Maximilians Universität, München
Is the minimum wage ethically justifiable? In this chapter, we attempt to answer this question from an order-ethical perspective. To this end, we develop two simple game theoretical models for different types of labour markets and derive policy implications from an order-ethical viewpoint. Our investigation yields a twofold conclusion. Firstly, order ethicists should prefer a tax-funded wage subsidy over minimum wages, if they assume that labour markets are perfectly competitive. Secondly, order ethics suggests that the minimum wage can be ethically justified if employers have monopsony power in the wage setting process. As it turns out, then, order ethics neither favours nor disfavours the minimum wage. Rather, it implies conditions under which this form of labour market regulation is justified and, hence, allows empirical science to play a great role in answering the ethical questions that arise in the context of the minimum wage debate. This illustrates one of order ethics’ strengths, viz. the fact that it tends to de-ideologize the debate about ethical issues
Keywords Order Ethics  Minimum Wage  business ethics  economic ethics  Pareto  prisoner's dilemma  efficiency  economics  game theory
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